Boat Loans: How Boat Financing Works – Updating

In love with a boat? Compared to car loans, financing a boat can be a much heftier investment.

Boats can be more expensive than a car, which means loan amounts can be higher and terms can be much longer.

How much you pay to finance a boat depends on a number of factors, including the type of boat loan you choose, the terms of the loan, your down payment, and your credit.

Let’s take a look at the different types of boat loans, your financing options, and how to apply for a boat loan.

Types of Boat Loans

Whether you want to take out a loan for a new or used boat, financing options include secured and unsecured loans. Each type of credit has advantages and disadvantages.

Secured Loans

A secured personal loan is backed by collateral. If you default on the loan, the lender can take the collateral as a form of repayment.

In many states, if you stop making payments on your auto loan, the lender can repossess it. Similarly, with a secured boat loan, the boat acts as collateral, meaning the lender may be able to take it back if you default.

Unsecured Loans

With an unsecured personal loan, the boat — or any other asset or property — is not used as collateral. Because unsecured loans are not tied to a specific asset, lenders consider them riskier and typically charge higher interest rates than a secured loan. But you may have more options on how to use an unsecured boat loan than a secured boat loan.

Second Mortgage

If you prefer not to take out a personal loan, a home equity loan, a type of second mortgage, could be another option. This type of loan would use your home as collateral for your boat loan. Interest rates on secured loans are typically lower than unsecured loans. However, home equity loans can be particularly risky because the stakes are so high: if you default on the loan, the lender could potentially take over your home.

How boat loans work: Typical boat loan terms

If you’ve had a car loan before, you already have a basic understanding of how a boat loan works. You can apply for a loan amount – minus any down payment – ​​and a term. If approved, the lender can offer competitive interest rates depending on how strong your credit score is.

Boat loan repayment terms

In principle, you can apply for a loan term of up to 20 years for a secured boat loan, depending on the loan amount and the lender. Unsecured boat loans — which are personal loans — tend to have shorter terms (usually no more than five to seven years). The longer the term of your loan, the more interest you pay overall on the loan.

A deposit may be required

Boat lenders often want to see a down payment, generally between 10% and 20%, depending on factors such as the lender and the cost of the boat. Some lenders offer 0% down payment loans – but remember that a down payment can protect the boat from depreciating or depreciating over time and prevent a situation where you owe more on your boat loan than the boat is worth . A down payment can also lower your monthly payment and the total amount of interest you pay on the boat loan.

interest rate

Boat loan interest rates are usually fixed and can vary widely depending on the lender and credit profile. As of August 2021, some lenders are offering initial annual percentage rates, or APRs, of about 4% to nearly 6% on secured boat loans. But factors such as boat type and model year, your credit history, loan term and loan size all affect your rate.

Where to get a boat loan

If you are looking to apply for a boat loan, there are a variety of lenders available – some banks, credit unions, and boat dealers offer boat loans. In addition, ship financing companies specialize in this type of loan. Here are some banks and credit unions that offer boat loans.

SunTrust

SunTrust, now Truist, offers unsecured marine loans. The bank’s online lending division, LightStream, offers loans ranging from $5,000 to $100,000 with terms ranging from 24 to 84 months — but the lender says you need excellent credit for the lowest interest rates.

US bank

US Bank offers loans of up to $150,000 for new or used boats, as well as refinancing. To qualify for the bank’s best interest rate, you must finance a new boat with a loan greater than $25,000 (no more than 100% of the boat’s value) and a term of 48 months or less. You’ll also need to set up automatic payments from a personal US bank checking or savings account.

bank of the west

Bank of the West offers both secured and unsecured loans for new and used boats and personal watercraft. The minimum loan amount is $10,000, and the bills on its website indicate that credit ratings of at least 700 are preferred.

Navy Federal Credit Union

The Navy Federal Credit Union offers loans for new and used boats and personal watercraft for terms up to 180 months. Direct Deposit Military Members may qualify for a discount. Military personnel of all branches of the armed forces, as well as their families and household members, are entitled to credit union membership.

USAA

USAA offers loans for both boat purchase and refinance with terms of up to 180 months. The company also finances jet skis and personal watercraft. To apply for a boat loan, you must be a member of the USAA. Current and former military members and their spouses and children may be eligible for membership.

What to consider before applying for a boat loan

Before you set sail on your new boat, there are a few things to keep in mind.

your credit

Some lenders offer a boat loan to subprime borrowers, but may still require a down payment and a low debt-to-income ratio. Keep in mind that if you have poor credit, you will likely be offered a higher interest rate than if you have excellent credit.

The total cost of owning a boat

When setting your boating budget, don’t forget to consider the costs beyond the monthly payments on your boat loan. These ongoing costs can include receipt fees, wintering, towing, shore storage, fuel, boat insurance, repairs, maintenance, registration and taxes.

Whether you need a marine survey

When applying for a secured boat loan, the value of the boat is a factor in how much you can borrow.

If you don’t get a new boat, you should have a marine survey done. During a sea survey, an inspector will examine the vessel, engine, and trailer, detailing the boat’s condition, noting any repairs needed, and determining whether it is safe to navigate the water.

How to apply for a boat loan

Applying for a boat loan is similar to applying for a personal loan or car loan. You must first find a lender. In some cases you can apply online. Otherwise, you may be able to apply in person at a bank or credit union.

Next, you’ll usually need to provide information such as the loan amount, the price of the boat, the type of boat, and the age of the boat — along with employment information and other personal information about your assets and debts. As with personal loans and auto loans, this can result in a tough loan inquiry to verify your credit profile (note that this may drop your credit score by a few points).

Then wait for approval, which may be available as early as the next business day or may take a few business days, depending on the lender you are working with.

Next Steps

Experienced boaters will do anything to be prepared on the water – so it’s good to take the same approach with a boat loan. Here are some suggestions to help you find the funding you want.

1. Shop around and compare offers from multiple lenders to find one that suits your financial needs.
2. Apply for your boat loan.
3. Read the terms carefully before you decide to sign. If it can, get ready to sail the seas.

If you can’t find a boat loan after doing a few estimates and comparing your options, it’s worth taking some time to build up your credit, pay off your debt, and save up for a down payment. And remember to include operating costs in your overall boat budget to avoid future financial swings.